Risk Factors Update Summary

• A reduction in interest rate characteristics of assets may impact pricing, with a decrease from 7% to 8%.
• A $25 million reduction in expected future recoveries on previously fully charged-off loans occurred.
• Total FFELP Loans decreased from $58.6 billion in 2022 to $52.6 billion in 2023.
• Loan modifications now include temporary interest rate reductions, forbearance, and term extensions, impacting collectability.
• Net charge-offs decreased by $40 million, primarily due to changes in charge-off rates.
• Added the need to access funds held at banks and financial institutions to meet cash requirements.
• Definitions for non-GAAP financial measures provided, excluding forward-looking reconciliations due to uncertainty.
• Private Education Loan originations decreased from $2.0 billion in 2022 to $1.7 billion in 2023.
• Total net cash used in financing activities decreased significantly from $10,047 million to $7,334 million.
• Net charge-offs increased by $26 million, from $256 million to $282 million.
• Changes in laws, regulations, and oversight could affect operations, with expenses decreasing by $24 million.
• Net interest income decreased by $48 million due to paydown of the loan portfolio.
• Loans in repayment decreased from $29,004 million to $26,204 million.
• Private Education Loan delinquencies greater than 90 days decreased by $31 million.
• Net fair value hedge ineffectiveness gains decreased from $22 million to $35 million.
• The company repurchased 9 million more common stock shares in 2023 compared to 2022.
• Adjusted Tangible Equity Ratio decreased from 7.0% to 5.9% due to changes in equity and assets.
• Interest rate reductions on Private Education Loans reduced from 13.2% to 5.3%, extending loan life.
• Changed the maturity date of senior unsecured notes from 2023 to 2024.
• Newly originated variable rate Private Education Loans are now indexed to 30-day Average SOFR.
• Net impact of goodwill and acquired intangible assets changed from ($19) million to ($30) million.
• Strategic actions include transitioning student loan servicing to MOHELA and exploring options for the business processing segment.
• The total assets decreased from $80.6 billion in 2022 to $70.8 billion in 2023.
• A $10 million increase in interest income due to changes in prepayment speed and remaining term assumptions.
• Loan modifications in 2023 include $175 million in Interest Rate Reduction, $14 million in Combination Rate Reduction.
• Announced strategic actions to simplify the company, reduce expenses, and enhance flexibility.
• Transitioned interest on FFELP Loans and Private Education Loans from LIBOR to Term SOFR and 30-day Average SOFR.
• Private Education Loans originated decreased from $2.0 billion to $1.0 billion.
• Private Education Loan allowance for loan losses increased from $843 million to $1,074 million.
• Cash, cash equivalents, restricted cash and equivalents at the end of the period decreased from $4,807 million to $2,793 million.
• Added potential basis risk and repricing risk with the transition away from LIBOR.
• Reclassification adjustments for derivative losses included in net income decreased from $84 million to $68 million.
• Private Education Loan forbearances decreased by $38 million from $401 million to $363 million.
• Provision for loan losses decreased by $128 million, including changes related to loan originations.
• Interest cash disbursements increased from $1,904 million to $3,431 million.
• Expected future recoveries on previously fully charged-off loans decreased from $274 million to $226 million.
• Long-term borrowings increased from $74.5 billion in 2022 to $61 billion in 2023.
• The Private Education Loan portfolio balance decreased from $18.7 billion to $17.0 billion.
• Total Core Earnings adjustments to GAAP decreased from $219 million to $187 million.
• Common stock repurchased decreased from $24.8 million to $17.21 million.
• Private Education Loan originations decreased from $1.7 billion to $647 million due to interest rate increases.
• The Private Education Refinance Loan CPR decreased from 15% to 10%.
• Private Education Loan securitizations increased from $11.754 billion to $12.189 billion.
• Increased Euro denominated bonds outstanding from $1.8 billion to $1.6 billion.
• Average purchase price per share for common stock repurchased increased from $18.44 to $17.84.
• Net income decreased by $12 million in 2023, with EBITDA down $14 million from 2022.
• Net interest income decreased from $1.3 billion in 2022 to $1.1 billion in 2023.
• Core Earnings adjustments to GAAP decreased by $22 million to $166 million.
• Income taxes paid decreased from $12 million to $5 million.
• Total secured borrowings decreased from $55.805 billion to $52.058 billion.
• A $9 million decrease in Business Processing revenue from 2022, offset by a $74 million increase.
• Ending total loans increased from $17,519 million to $19,525 million to $21,180 million.
• Operating expenses increased by $24 million, primarily due to a $73 million regulatory-related expense.
• Derivative assets decreased from $11 million to $6 million, while derivative liabilities decreased from $255 million to $189 million.
• The Student Debt Relief Plan could result in up to $20,000 in one-time debt relief.
• Total derivative liabilities decreased from $256 million to $190 million.
• Allowance coverage of charge-offs increased from 2.1% to 3.0% on a GAAP basis.
• The total liabilities decreased from $78 billion in 2022 to $67.8 billion in 2023.
• The provision for loan losses increased by $140 million, with $79 million allocated to Private Education Loans.
• Fair value hedge ineffectiveness gains decreased from $24 million to $0 million.
• The Biden-Harris Administration announced the Student Debt Relief Plan on August 24, 2022.
• Total earning assets decreased from $64.28 billion to $57.22 billion.
• Allowance as a percentage of ending total loan balance increased from 3.5% to 4.8% on a GAAP basis.
• Net interest income after provisions for loan losses decreased from $114 million to $87 million.